Agency downgrades WIU credit outlook rating

Friday

Mar 22, 2013 at 7:00 AMMar 22, 2013 at 1:09 PM

Illinois owes WIU slightly more than $46 million

By Dave GongMcDonough County Voice

Moody's Investor Services this week downgraded the credit outlook rating for Western Illinois University from stable to negative — something that officials say is evidence that finances at state entities like WIU are being monitored despite the tens of millions of dollars still owed to them.

In an interview Thursday morning, Matt Bierman, budget director at WIU, said although the university's credit outlook was downgraded, Moody's affirmed its current A2 credit rating. As a result, WIU now has the same credit rating — A2 with a negative outlook — as the state.

The reason WIU's credit outlook was downgraded, Bierman said, relates to how dependent WIU is on state funding. Currently, Illinois owes WIU slightly more than $46 million.

The budget director said the state currently owes about $41 million to the university and its vendors and an additional $5 million in MAP Grant funding.

Tied into the rating decision, Bierman said, is the state's long-term ability to fund higher education and its ability to pay its current bills.

"Part of it is a cash flow thing," he said. "The pension thing is a part of the state's overall budget problems and all of it contributes to the problems they gave contributing to higher ed."

"It means they're keeping an eye on us," Bierman said. "They think there's signs that say because we're directly related to the state, it's a riskier investment. Our numbers are still good enough to keep us at the A2 mark."

Several other state-funded universities had their credit ratings downgraded by Moody's at the same time on Tuesday. Those universities include Governor's State University, Northeastern Illinois University, Northern Illinois University and Eastern Illinois University. Credit rating outlooks were also downgraded to negative for Illinois State, Southern Illinois University and the University of Illinois.

In a news release Tuesday, state Rep. Norine Hammond, R-Macomb, said Illinois has only paid WIU about 20 percent of its yearly appropriation during the first nine months of Fiscal Year 2013.

"When the state's credit rating was lowered late last year, it effectively hurt all entities that do business with the state," Hammond said in the release. "Because Western Illinois University relies heavily on state funding and the credit rating agencies do not put much reliance in Illinois state government fixing our tremendous budget problems any time soon, they have essentially put us on notice."

Bierman said the outlook downgrade won't affect the university's ability to borrow money, but it will affect the university's interest rate when it does borrow money. Additionally, the rating decision from Moody's will force WIU to "reconsider" how it funds capital improvement projects in the future.

Also in an interview Thursday, state Treasurer Dan Rutherford said the downgrade of state universities' credit outlook rating does not change the relationship between the state and higher education, but the downgrade could be reflected in higher costs for students if the university goes into the bond market for capital projects.

"The fact is the universities have a significant part of their revenues coming from state appropriations," Rutherford said.

The treasurer described the state's budget problems as "stressful times," adding that the governor has looked at larger agencies that receive state funding. The largest three agencies in the state that rely on government funding are corrections, education and Health and Human Services.

Education seems to be affected more than many other programs, Rutherford said, because of the size of the agency and how much money education receives on an annual basis.

Although Moody's has downgraded WIU's credit outlook rating, Bierman said there is some good news in the fact that WIU is also rated through Standard & Poor's Rating Services.

"With S&P, we are still A-stable," he said, "but they are continuing to monitor us as well."

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